The IRS has published a new revision to the annual reporting form for FBAR – Foreign Bank Account Report – Form TDF90-22.1, revised March 2011.

The form warns not to use earlier versions of this form when reporting the existence of any NON-US bank or broker accounts in which the balance – or combined balances – exceeds US$10,000 for as much as a single day in the year (in this case, 2010).

If you have already reported for 2010 using the previous version of TDF90-22.1, I would think it reasonable that the US Treasury (to whom this form actually goes) would not have any problem about it at this writing (May 19th). Except that they – via the IRS – have not been very reasonable in the administration of the program ever since they started ramping it up in 2009.

Please know that this form is due no later than June 30, 2011 – and this means THEY MUST HAVE ARRIVED AT THE US TREASURY’S POST OFFICE BOX BY JUNE 30TH. Draconian fines for being late or not filing at all.

There isn’t any good news when it comes to FBAR; it is a pain in the patoot burden to millions of US taxpayers who own or have signing authority over a non-US bank or brokerage account (and some foreign trusts) with draconian fines for non-c0mliance or incomplete compliance.

For more on this unfortunate topic, check out our webpage on FBAR and FATCA at: http://www.globaltaxhelp.com/fbar-new-enforcement. You can also find the newly revised forms – short or long – of TDF90-22.1 PDF for download or printing. Filing address is shown on the form. Good luck.

There are very few news or journal articles about the IRS’s FBAR (Foreign Bank Account Reporting) initiative – their Voluntary Disclosure Program (VDP), a controversial and troubled program in which thousands of US taxpayers find themselves.

For the most recent newpaper article on the current status of the program see “Navigating the latest US Tax Maze” from Gulf News (based in UAE) which was published last week on January 29th.

Our website has more recent articles with additional information on both FBAR and the new FATCA (I’ll talk more about this one in future blogs!). If you’re interested click on the “FBAR and FATCA” webpage on the site.

Q: I am a US citizen living in England. If I were to win the UK lottery (which is tax free) – would I still be liable to pay taxes to the U.S? I file U.S. taxes each year along with the foreign earned income form.

A: Yes, foreign lottery winnings are taxable by the IRS in the US (though they are generally exempt from the particular state income tax). Do remember that if the aggregate value of of your foreign bank accounts exceed $10,000 at any time during the calendar year you have a legal requirement to file form TD F 90.22.1– please see the IRS FAQ page on FBAR (Foreign Bank Account Reporting).

The IRS has made yet another change to what’s known as FBAR– they have “temporarily suspended the requirement to file a Report of Foreign Bank and Financial Accounts for the 2009 and earlier calendar years, for people who are not U.S. citizens, residents or domestic entities”.

Announcement 2010-16 (PDF) temporarily suspends the requirement to file Form
TD F 90-22.1, also known as the FBAR, as the IRS tries to clear up the definition of “United States person.” In addition, the IRS issued Notice 2010-23 (PDF), which provides FBAR filing relief for some persons with signature authority and who own commingled funds.

. . . After receiving a significant number of public comments, the Treasury Department published proposed FBAR regulations to provide taxpayers with guidance on who is required to file FBARs due on June 30, 2010, and how to answer FBAR-related 2009 federal income tax return questions.

The IRS and the Treasury Department now believe it is appropriate to provide the following administrative relief: The requirement to file an FBAR due on June 30, 2010, is suspended for persons who are not U.S. citizens, U.S. residents, or domestic entities. Additionally, all persons may rely on the definition of “United States person” found in the July 2000 version of the FBAR instructions to determine if they have an FBAR filing obligation for the 2009 and earlier calendar years. The definition of “United States person” there is: (1) a citizen or resident of the United States, (2) a domestic partnership, (3) a domestic corporation, or (4) a domestic estate or trust.

This substitution of the definition of “United States person” applies only with respect to FBARs for the 2009 calendar year and to earlier calendar years.

All other requirements of the 2008 version of the FBAR form and instructions, as modified by Notice 2010-23, remain in effect until changed by subsequent guidance issued by the Treasury Department, including the IRS.

Q: I worked in China for three years. While there I deposited my salary in a bank account and when I left the country I left money sitting in the account. While in China I filed and paid Chinese taxes.

After returning to the US, I learned that I was supposed to file taxes in both China and the US. I hate dealing with tax documents, so I did the easiest thing I could and just filed the missing years in the US as zero income.

Later, I learned that I was supposed to report the money I earned in China in the tax returns. I’d now like to access some of the money sitting in my account in China. I don’t want the hassle of re-filing tax returns and I don’t want to be double-taxed on the money.

The reason I’m asking this questions is because I recently got in touch with the Chinese bank to update my contact information and let them know I was living in the US. They sent me a form asking if I wanted to declare the account to the US government on a W-9 form.

I want to go through as little paperwork, expense and bureaucracy as possible. Therefore I’m not inclined to file a W-9 and declare the account to the government. Is the IRS going to come after me for money laundering?

A:It is clear from your question that you know you are not in compliance. You know that you need to correct your prior years returns. And, you may need to file form TDF90-22.1(PDF) which is used to report foreign bank accounts under your control IF your combined foreign balances ever equal $10,000 or more on any given day–sometimes referred to as FBAR (see IRS FAQ). The penalties for not filing TDF 90-22.1 are very large.

You want to resolve this so you can access your funds without any concern for future actions against you. Amend your prior year returns to report any interest/dividends you received each year in your Chinese accounts. Determine if you have to file Form TDF 90-22.1.

It is important to note that you are not penalized unless you owe money. So, it is possible that you would be fully covered by the Foreign Earned Income Exclusion and Foreign Tax Credits. For more information on these, visit our Expat Tax Basics page on our main site.

You won’t know until you redo your tax returns. Would you rather spend a few hours on your own, or pay a professional to do it, and know for certain that the issue has been put to bed or always wondering if you are going to get caught?